Saturday, July 25, 2009

Cash For Clunkers Will Put More Clunkers On The Road

Think the Cash For Clunkers program will put more fuel efficient cars on the road? Think again. Under the Cash For Clunkers rules you must turn over your car to the dealer who gives you $4500 for it. So really unless you have a fairly crappy car you could likley get more than $4500 with a private sale. The folks who actually drive cars worth less than $4500 are not out buying new cars so even with a $4500 voucher they are likley to opt for the used car probably saving well over $4500 by taking advantage of someone elses depreciation loss. The only persons who really benefit are truck owners who will trade into a new truck. Though wise truck owners would also purchase used and not new as trucks don't change much from model year to model year. The Cash For Clunkers bill should be been called the auto dealer welfare act because when you do the math and analyze who can actualy use the program under the Cash For Clunkers Rules you'll find that the only benefit falls to the dealers for the small percentage of folks that actually dump their paid off beater for 5-6 years of car payments. More likley however folks not knowing the rules of the Clunker Bill will show up and be disappointed that they cannot trade their car in without taking a loss then decided to go the traditional route of a true trade in or private sale and purchase of a new or 1-2 year old car of their choosing regardless of gas milage. So dealers win by the program generating foot traffic. Most consumers lose because they will most likley finance the cars roping off a chunk of monthly cash flow due to car fever.